The state will ends its contract with the Bluegrass Area Development District to provide services to unemployed and underemployed workers in a 17-county region June 30 because of ongoing financial issues at the district, state officials said Wednesday.
In a letter sent to the leadership of Bluegrass, Gov. Matt Bevin told the district the Education and Workforce Development Cabinet was already seeking a different provider for services for the area that includes Fayette County.
Bluegrass’ current contract ends June 30. It was awarded a new contract in January to continue to provide services until Sept. 30, 2017. That contract was for $11.4 million, which included some carry-over dollars from previous years.
The new provider will oversee services for six months,from July 1 to Dec. 31. Bids to provide services will be solicited during that time, Bevin said.
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Bluegrass is barred from bidding. Bluegrass has had the contract to oversee workforce training in the 17-county area for decades.
“At a minimum, the Commonwealth of Kentucky is hereby prohibiting the use of BGADD as a provider of services after June 30, 2016,” the letter said.
In the letter, Bevin said the federal regulations governing federal workforce dollars allow states to re-organize if the state believes federal guidelines have not been followed. Those re-organization options include using an alternative provider or prohibiting the use of a provider.
The state’s decision can be appealed to the U.S. Department of Labor within 30 days.
“The cabinet is making every effort to ensure that services are not disrupted,” said Kim Brannock, a spokeswoman for the cabinet. Unemployment insurance is overseen by the state and not Bluegrass and will not be effected by the switch to a new provider, Brannock said.
David Duttlinger, the executive director of Bluegrass, did not respond to an email asking for comment.
The move to yank the contract from Bluegrass comes after the cabinet ordered Bluegrass on March 31 to repay the state $898,525 —money the state says was misspent from 2010 and 2013. Some of those questioned costs include excessive travel and rent for Bluegrass’s Perimeter Drive building. The money was paid to a nonprofit started by the founding director of Bluegrass.
The Bluegrass board voted to appeal the final determination and maintained problems cited in the state’s final determination letter had been corrected.
In his letter, Bevin said questions about spending at the district continue.
Cabinet staff conducted a review of spending for 2015 and has preliminarily identified other areas of concern including “excessive travel expenses and questionable documentary support for use of program funds on authorized activities. Moreover, it appears there is a lack of independent verification of training completion and employment outcomes for participants in the programs.”
Brannock said the state could not release additional information about the 2015 questioned costs because that report has not yet been completed.
Brannock said Bluegrass has not yet paid the $898,525. It has until June 30 to do so.
The Bluegrass board recently authorized using federal workforce dollars to pay its lawyers for work done during the state examination. State workforce officials told Bluegrass it couldn’t use federal workforce money to pay lawyers to appeal or work on the state examination of questioned costs. Bluegrass has maintained it can use that money to pay legal fees if they are not fighting federal authorities.
The state could move the contract to two other providers that bid on the workforce contract last year. Community Action of Kentucky and National Able — based in Chicago — also bid on the contract that was ultimately awarded to Bluegrass. Community Action later filed a bid protest, saying some of the locally elected officials who scored the bid and ultimately awarded the contract to Bluegrass also sit on Bluegrass’s executive board.
Community Action of Kentucky was the second highest-scoring bidder.
Lexington Mayor Jim Gray is a member of the Bluegrass board and one of the 17 elected officials that award the federal workforce contracts. Gray was the lone local official to vote against granting the workforce training contract to Bluegrass in January.
In a statement, Gray applauded Education and Workforce Cabinet Secretary Hal Heiner, Bevin and others for taking steps to ensure workforce dollars are being spent wisely and benefiting the people who need it most. At one point, Lexington and Fayette County had pushed to create its own workforce area, separate from the Bluegrass district. That bid ultimately failed.
“There have been a lot of 16-1 votes with the Bluegrass ADD Executive Board, and not a lot of progress,” Gray said. “ I hope now we can turn the page.”